Correlation Between Empire State and Optimism

Can any of the company-specific risk be diversified away by investing in both Empire State and Optimism at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Empire State and Optimism into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Empire State Realty and Optimism, you can compare the effects of market volatilities on Empire State and Optimism and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Empire State with a short position of Optimism. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire State and Optimism.

Diversification Opportunities for Empire State and Optimism

0.85

Correlation Coefficient

Empire State  Optimism

Very poor diversification

The 3 months correlation between Empire and Optimism is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and Optimism in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optimism and Empire State is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Empire State Realty are associated (or correlated) with Optimism. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optimism has no effect on the direction of Empire State i.e., Empire State and Optimism go up and down completely randomly.

Pair Corralation between Empire State and Optimism

Given the investment horizon of 90 days Empire State Realty is expected to generate 0.32 times more return on investment than Optimism. However, Empire State Realty is 3.11 times less risky than Optimism. It trades about -0.23 of its potential returns per unit of risk. Optimism is currently generating about -0.21 per unit of risk. If you would invest  1,006  in Empire State Realty on December 30, 2024 and sell it today you would lose (223.00) from holding Empire State Realty or give up 22.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.38%
Values	Daily Returns

Empire State Realty  vs.  Optimism

Empire State Realty

Risk-Adjusted Performance

Very Weak

Over the last 90 days Empire State Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Optimism

Risk-Adjusted Performance

Very Weak

Over the last 90 days Optimism has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for Optimism shareholders.

Pair Trading with Empire State and Optimism

The main advantage of trading using opposite Empire State and Optimism positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire State position performs unexpectedly, Optimism can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Optimism will offset losses from the drop in Optimism's long position.

The idea behind Empire State Realty and Optimism pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.